European Centre for International Political Economy (ECIPE)’s Post

My latest blog post dives into Europe's heavy burden of bureaucracy, tax code complexity, and very high taxes on labour and corporate income ... Germany is a case in point. But every year of inaction drains also drains other Member States of billions in lost economic growth and squandered opportunities. The time for symbolic gestures at the EU level is over – Brussels and national governments must prioritise dismantling the bureaucratic, tax, and regulatory burdens at EU and national level. A new German government, potentially led by the Christian Democrats, could provide the decisive leadership Germany so desperately needs, delivering meaningful reforms that not only revitalise its own economy but also inspire a wave of change across the EU.

This paper brought to my attention by Dr. Eoin Drea has much to commend it notably in showing up unnecessary bureaucracy at #national level in #Germany. However Dr Matthias Bauer’s assertion that “Complex laws (like #CSRD or #CS3D) often benefit large corporations, which can afford armies of consultants and legal advisors to ensure compliance, while smaller businesses struggle or shut down” could not be further from the truth when it comes to the top 60 industrial & tech companies in the EU who make up the European Round Table for Industry - ERT and not only them. The endless stream of #reportingstandards is among the very top concerns of “large corporations” who are very mindful of the impact of #SMEs so important to their value & supply chains. To the point that it becomes a big factor in making the EU an uncompetitive place to do business & invest. Corporations large & small have common cause when it comes to pushing hard for the #SimplificationRevolution now enjoying the support not only of the incoming European Commission President Ursula von der Leyen and Commissioner-designate #ValdisDombrovskis but the Council of the European Union in its #BudapestDeclaration & the European Parliament and MEPs like Axel Voss. Whisper it softly but they ground may finally to be moving under our feet in the right direction.

"While EU rhetoric about bureaucracy is making some headlines, very high taxes on labour and corporate income quietly kill Europe’s competitiveness. By contrast, US tax rates for corporate and labour income encourage broad investment and job creation, while supporting consumer spending. Similarly, Ireland and Estonia, with their competitive tax regimes, attract talent and investment. Yet Brussels and most Member states cling to a high-tax, high-regulation model that stifles growth. Member State governments must embrace much simpler tax regimes and lower taxes to remain competitive globally". Excellent from Dr Matthias Bauer and European Centre for International Political Economy (ECIPE)

This week we learned a number of things. Once EU leaders get involved - it’s game over for parliamentary antics. Meloni would not allow her man in Brussels, Fitto, to be sidelined and neither would Pedro Sánchez when it comes to Teresa Ribera, the two have a close relationship. Both Spain and Italy made it clear there was no plan B. As a good source explained to me: the leaders nominate and their candidates have to go through. Alternative was no Commission. And no one a) wanted that b) was prepared to assume the political cost. Interestingly, all Commissioners went through despite some poor hearings. I can think of at least three who would have been rejected in a different context. Europe has shifted to the right - and the institutions too. The Council is dominated by the EPP, the College will count with a majority of EPP Commissioners and the political agenda is shifting to what we would normally describe as “conservative” policy items, even if one would like to think security and defence should be universal to all parties. The EPP has two majorities at its disposal at the European Parliament. The deal struck this week over the College of Commissioners reiterated the need for a pro-European, pro-rule of law, pro-Ukraine majority, but the reality is that document in the realpolitik of it all is non-binding and only useful to justify 10 days of vetos and posturing. If I had to bet: the EPP will shift when convenient taking into consideration the risks it takes when working with a hard-right it competes against nationally. Think Poland, think Spain. In this context, the progressive, socialists and greens are on the receiving end and certainly weaker. You could tell by the bitterness expressed by their own MEPs after the deal was struck. Their leverage on the EPP is slim. Lastly, the von der Leyen Commission will 2.0 will get to work as schedule with two major questions at stake: the return of Trump and the war in Ukraine. But the two events this week are correlated and present a very relevant theme: where is the European right heading? The answer to that question will dictate the European ethos for the next mandate.

Last week, What's up EU interviewed Margrethe Vestager, who has been at the helm of EU competition policy for the past 10 years. We discussed how competition policy has changed over the last decade (and in the past few weeks!), what comes next, whether competition policy is democratic enough, and even what Vestager will miss the most in Brussels — but also much more. Enjoy the read!

James Madison and Alexander Hamilton's Federalist Paper #20 criticizes the Articles of Confederation by examining the historical example of the United Netherlands. They highlight the weaknesses of the Dutch confederation, such as the lack of central authority, inefficiency, and vulnerability to foreign influence and internal conflict. Madison and Hamilton argue that these same issues plague the Articles of Confederation, rendering the U.S. government incapable of effective governance. They advocate for the ratification of the Constitution, which proposes a stronger federal structure to ensure national unity, enforce laws, and manage domestic and foreign affairs effectively. This paper underscores the necessity of a robust central government to preserve the Union and address national challenges. #federalist #federalistpapers #hamilton #madison #constitution #articlesofconfederation

Donald Trump is dramatically lowering the bar on acceptable behaviour in politics, with repercussions far beyond the United States. His undermining of US political institutions and democracy encourages autocratic behaviour in European countries as well. But the EU is even more at risk because of its nature as a multinational polity based on law. If EU leaders let business believe that the law matters less and enforcement will go soft, then compliance will decline, causing uncertainty and encouraging corruption. By contrast, if most governments stand firm and defend the EU’s rules-based system, contagion by Trumpism can be contained.   Trump and his broligarchs are changing the norms of good corporate behaviour. Powerful American corporations are appointing Trump favourites to their management or boards to curry favour. Putative members of the next administration are talking of non-enforcement of business regulation. Even worse for Europeans, there are US business leaders contesting the extra-territorial reach of EU regulation.   As Jean Pisani-Ferry and I write for Bruegel - Improving economic policy, the most fundamental protection for the European economy is to uphold the rule of law. As a regional organisation rather than a nation-state, the EU depends on largely voluntary compliance with the agreements and laws among its members. Despite being a regulatory power, in practice the Union has relatively weak enforcement mechanisms, relying largely on “sincere cooperation” among its members. Many of the key protections of values depend on soft law and good behaviour by governments. If the EU institutions turn a blind eye to non-compliance, it will fatally undermine the community of law that the European Union is built on.

In a significant turn of events, the Italian Premier abstained from voting for Ursula von der Leyen, citing concerns that the European Commission disseminates ‘fake news’. This move can be perceived as more than just a political stance; it could signal a shifting dynamic in the intricate tapestry of European governance. 🔹 **Highlights:** - **The Abstention:** This abstention might not be an isolated event. Historically, such actions often herald broader geopolitical shifts. - **The Accusation:** ‘Fake news’ claims against the European Commission raise questions about the authenticity of information and transparency within the EU's leading administrative body. Let's delve into the implications of this development. 1. **Power Dynamics Realignment:** By choosing to abstain, the Italian Premier has not only voiced a dissent against Ursula von der Leyen but also potentially instigated a reevaluation of allegiances within the European Parliament. Could we be entering an era where mere abstentions trigger major policy reconsiderations? 2. **Credibility and Trust Issues:** - The charges of ‘fake news’ are grievous indeed. The European Commission, for its integral role, cannot afford to have its credibility questioned. This incident might necessitate a review—an internal audit perhaps—to restore faith in the institution. - Furthermore, such claims may serve as a cautionary tale. Leaders across the EU will keenly observe how this narrative evolves, measuring their own interactions and stands upon this yardstick. 3. **Economic Ramifications:** The governance and stability of the European Union have far-reaching impacts on global markets. Any potential unrest or shifts within its power structure could reverberate economically, affecting trade, currencies, and international relations. 4. **Future Predictions:** - We may observe heightened scrutiny of Commission activities and communications henceforth. - Allies and adversaries of the EU will undoubtedly see this rift as an opportunity—nations may re-strategize their partnership approaches. - There's potential for this event to open discussions around the strengthening of internal accountability mechanisms within the EU framework. This occurrence is a wake-up call for institutions around the globe about the indispensable need for clarity, transparency, and trust. A testament to how holding steadfastly to principles can send profound ripples through entrenched systems, the Italian Premier's action might be a harbinger of significant shifts to come. #EuropeanUnion #Geopolitics #Governance #FakeNews #Transparency #PolicyShift

📝 New publication: Having our cake and eating it too? European Union and Czechia getting ready for enlargement 🇪🇺 With enlargement becoming a geopolitical necessity🌍, changes to how the EU operates will be inevitable. In our latest paper, Vendula Kazlauskas and I explore potential adjustments to how Member States are represented in EU institutions and tackle the ongoing challenge of protecting the rule of law across the Union. We look not only at how these changes could improve EU efficiency but also at their acceptability to more skeptical members, focusing especially on Czechia's perspective 🇨🇿. AMO - Association for International Affairs Friedrich Naumann Foundation for Freedom https://lnkd.in/dhQBK-cF

#Draghi's report doesn’t contain anything remarkably new, but it does include some useful data gathering and analysis. While acknowledging the significant differences between the EU and US political and regulatory systems, it's hard not to be struck by the following figures... The issue is not just the number of regulations, but also how these should be designed to #incentivise market operators rather than punish them. Addressing public policy challenges and upholding citizens' rights and consumer protection is crucial, but the lack of #harmonisation and the level of prescription in EU regulation could well be defeating the purpose. There may be alternative approaches worth considering. "While direct comparisons are obscured by different political and legal systems, around 3,500 pieces of legislation were enacted and around 2,000 resolutions were passed in the US at the federal level over the past three Congress mandates (2019-2024). During the same period, around 13,000 acts were passed by the EU. Despite this increasing flow of regulation, the EU lacks a quantitative framework to analyse the costs and benefits of new laws." The report — divided in two parts (a shorter strategy paper and a more in-depth analysis and recommendations) — is available at this link: https://lnkd.in/ePMWiNVB #betterregulation #eucompetitivness #digitalisation #bettergovernance